If you are looking to become a freelance in Italy and carry out an activity on a regular and continuous basis, then it is necessary to open an Italian VAT number (Partita Iva) and comply with the requirements.
How to start your own business in Italy
How to work as a self-employed in Italy: when is a VAT number mandatory?
Those who are self-employed and register as independent contractors are required to open a VAT number in Italy.
What is self-employment in Italy? Who needs a VAT number?
Self-employment (also referred to as “freelance”) refers to every type of employment that includes all the following features at the same time:
- The performance, against remuneration, of a work or service;
- The performance with predominantly own work;
- The absence of any subordination to the client.
This is what Article 2222 of Italian Civil Code provides for.
When is self-employment considered regular and permanent?
The Italian Revenue Agency considers regular and continuous an activity that presents the following characteristics:
Those who carry out an income-generating activity with these characteristics are required to open a VAT number in Italy.
The Italian Revenue Agency specifies that the obligation to register for VAT exists even if the self-employed activity is not the only activity carried out.
Indeed, the same subject can carry out two different activities, both on a regular and continuous basis.
For example, an employee might carry out another activity as a freelancer. Since such activity has a regular and continuous nature it requires the opening of a VAT number.
Occasional self-employment and regulated professions
Those who carry out occasional self-employment are not obliged to open a VAT number in Italy.
However, there is no regulation or limit in terms of fees received or days dedicated to the activity that triggers the obligation to get a VAT registration.
The only characteristics to be taken into consideration are the continuing character and the habitualness of the performance.
On the other hand, It is important to point out that anyone carrying out a professional activity falling under the so-called protected professions (regulated professions) is always obliged to carry it out with VAT registration.
“It is the Italian law that determines the protected intellectual professions for the exercise of which the enrolment in special registers or lists is required” (Article 2229 of the Italian Civil Code)
A doctor who works in the healthcare sector as a self-employed person in Italy is obliged to open a VAT number. In this case it is a protected profession (regulated profession).
An IT consultant, who is an employee and has concluded a contract with another company to provide software support for 2 hours per month every month, is obliged to open a VAT number. Indeed, in parallel to his employee activity, he carries out a regular self-employed activity.
The same IT consultant, an employee, agrees with the university a cycle of 3 lectures on software matters. In this case the activity can be considered occasional as it does not have the character of continuity and habitualness.
Italy VAT number: How to open partita Iva in Italy?
What is partita Iva in Italy?
The Italian VAT number (Partita Iva) is an 11-digit code that uniquely identifies all operators who intend to carry out an economic activity in the territory of the State. It is assigned by the Italian Revenue Agency to all taxpayers who request it through a special form.
How to get a VAT number in Italy?
The Italian Revenue Agency provides the tools to apply online for a VAT number. It is possible to download the software that allows you to fill in and send Modello AA9/12 through which you may request a VAT number. Below are the links:
The compilation of the form is simple, but it is always advisable to avail yourself of the support of an accountant in order to carefully assess some important aspects of self-employment, such as:
- Choosing the right activity code;
- Choosing the most convenient tax regime to opt for at the opening stage;
- The fulfilments associated with the chosen activity code (registration with the Chamber of Commerce, communications to the SUAP, communications to the questura (Police etc.);
- Registration with the correct social security fund in relation to the chosen ateco code and the activity carried out.
What documents are required to open an Italian VAT number?
The documents required to open a self-employment activity are the following:
- Italian tax code;
- Valid identity document (or passport);
- The address of residence in Italy updated at the time of opening the VAT code;
- The VAT registration opening form prepared by the consultant and signed by the client for acknowledgement and acceptance;
- The privacy and anti-money laundering form prepared by the consultant and signed by the client.
How long does it take to obtain a VAT number in Italy?
You can get an Italian VAT number within 24 hours, by submitting the indicated documentation to the accountant.
For some types of activity you will also need a registration with the Chamber of Commerce, without which it is not possible to start the activity. The time required for this registration can vary from 1 to 3 weeks depending on the timing of the Chamber of Commerce.
Mandatory requirements to open self-employment business in Italy
Compulsory requirements for all activities:
- opening a VAT number;
- registration with the social security fund envisaged for the activity.
Compulsory fulfilments for some activities only:
- Enrolment in the Companies Register at the Chamber of Commerce;
- registration in the craftsmen’s register;
- communication to the SUAP of the Municipality;
- communication to the questura.
How much does it cost to open a partita Iva in Italy?
The costs of opening a VAT number
The application for the Italian VAT number is free. There are no stamp duty or tax to pay.
In case the activity falls within those for which there is an obligation to register to the Company Register at the Chamber of Commerce, the following fulfilments apply:
- stamps and taxes of approximately 35€ (one-off fee at the time of registration);
- a 53€ fee to be paid for each year of permanence in the company register.
If you consult a Certified Account, a fee of between 150€ and 500€ must be taken into account, depending on the number of formalities required according to the activity.
How much does a VAT number cost annually?
The compulsory fulfilments for self-employment activity with VAT registration vary according to the:
- type of activity:
- professional activity (protected or free professions);
- business activity (sole proprietorship);
- artisanal activity (artisan company);
- agricultural activity.
- chosen accounting regime:
- chosen tax regime:
For this reason, consultancy costs may vary from one VAT number to another.
What are the annual fixed costs for the Italian VAT number?
In general, the annual professional tariff provides for:
- Annual fixed costs between 1.800€ and 2.400€ for the ordinary tax regime for a turnover of up to 100.000€ and a number of accounting entries of maximum 600€
- Annual fixed costs between 400€ and 1.200€ for the flat-rate tax regime.
Italy self employed tax: how much tax a self-employed has to pay in Italy?
Depending on the tax regime, taxation for self-employment income in Italy may vary.
The two main tax regimes you can choose from are:
- The ordinary regime;
- The flat-rate regime.
The ordinary regime: how do you calculate self-employment income?
The income of a professional activity
The income of a self-employed professional activity (freelance activity) in Italy is given by the difference between:
“fees received and expenses incurred inherent in the activity calculated analytically”.
Income forcommercial/artisanal activity: what is a sole trader in Italy?
When self-employment is carried out in the form of a business, it is referred to as a sole proprietorship sole proprietorship.
Business income is income derived from the exercise of commercial businesses.
The exercise of commercial businesses means the exercise by habitual, though not exclusive, profession of the activities indicated in Article 2195 of the Italian Civil Code (Article 55 of the TUIR)
Examples of commercial businesses:
- The industrial activity aimed at producing goods or services
- The intermediary activity in the circulation of goods
- The activity of transport by land, water or air
- Banking or insurance activity
- Other activities ancillary to the above
The income of a self-employed commercial activity (or a artisanal activity) in Italy is given by the difference between:
“positive and negative components of income”
Self-employed Italy tax: the ordinary tax regime
Income from professional, commercial or artisanal activity is taxed in Italy according to a progressive taxation system based on brackets.
|Taxable income (for income brackets)||Tax rate (for income brackets)|
|up to 15.000€||23%|
|from 15.001€ to 28.000€||25%|
|from 28.001€ to 50.000€||35%|
Italy freelance tax calculator example: ordinary regime
Total invoices collected: 50.000€
Total expenses paid (activity-related expenses): 20.000€
Self-employment income: 30.000€
Social security contributions paid and related to the activity: 7.800€
Taxable income: 22.200€
15.000*23% = 3.450€
7.200*25% = 1.800€
Total taxes due 5.250€
Inpatriate tax regime
For those who transfer their residence to Italy there is a preferential tax regime: the special tax regime for inpatriate workers.
This new residents regime allows a 70% reduction in taxable income (90% for relocation to certain regions of Italy).
The flat-rate tax system in Italy
As an alternative to the ordinary regime, the favourable flat-rate regime can be applied, if some requirements are met.
Any holder of a VAT number who engages in business, art or profession on an individual basis can benefit from a tax rate of up to 5%.
Keep in mind: by opting for the flat-rate tax regime, the tax-advantaged impatriate regime can no longer be applied.
How income is calculated in the flat-rate scheme
Unlike the ordinary regime, taxable income in the flat-rate scheme is calculated by applying a profitability coefficient to the annual turnover received.
The applicable profitability coefficient depends on the chosen ateco code related to the activity carried out.
There are two main differences from the computation of income under the ordinary regime:
- Positive income components, for the purpose of calculating taxable income, are always and only taken into account if actually received during the tax year;
- Negative income components (costs and expenses related to the activity and incurred during the year) are not deductible. A flat-rate profitability coefficient is applied instead of the analytical deduction of costs.
Italy freelance tax calculator example: flat-rate scheme
Total turnover received in the year: 30.000€
Profitability coefficient corresponding to the ateco code (example): 78%.
Income calculated by applying the profitability coefficient: 23.400€
Social security contributions paid and related to the activity carried out (deductible): 6.100€
Taxable income: 17.300€
Total tax 5%: 865€
Which type of VAT number is most convenient?
In conclusion, opening a VAT number under the flat-rate scheme certainly implies lower annual costs both in terms of management costs and tax payments.
On the other hand, the ordinary regime allows for the application of the benefit provided for the impatriate regime. It is therefore necessary to carefully assess the specific case and request a tax simulation before opening the VAT number.
How does social security work for Self-Employed in Italy?
Social security contributions are compulsory for everyone who works in Italy. Therefore, self-employed workers are also obliged to register with the social security fund and pay contributions.
Social security contributions vary depending on the activity carried out.
In the case of regulated professions registration with private social security fund corresponding to the register to which they belong is mandatory. Some examples are: Lawyers, Notaries, Accountants, Engineers, Doctors, Veterinarians, etc.
For foreign self-employed workers, the title must be recognised by the Italian register to which they belong. Without enrolment in the Italian register, registration with the private social security fund is not possible.
Non – regulated professional activity (freelancer)
In the case of non-regulated professional activities, registration with the INPS (Italian National Social Security Institution) separate management fund is mandatory.
The INPS rate under separate management for the year 2023 is 26,23% and it is calculated on the self-employment income computed as indicated in the fourth paragraph.
If the inpatriate scheme is also applied for social security purposes, the income is deemed to be reduced by 70% (or 90% in specific cases).
In the case of activities carried out as a business (sole proprietorship), a distinction must be made between:
- Commercial activity – registration with INPS traders’register
The rate for traders is 24.48% for the year 2023.
There is an annual minimum payment of 4.292,42€, independent of the income earned from the activity. This means that a taxpayer who does not issue or collect any invoices during the year is still obliged to pay the minimum annual amount (fixed annual INPS of 4.2924,2€).
- Artisan activity – registration with INPS artisans’register).
The rate for artisans is 24% for the year 2023.
There is an annual minimum payment of 4.208,40€, independent of the income earned from the activity. This means that a taxpayer who does not issue or collect any invoices during the year is still obliged to pay the minimum annual amount (fixed annual INPS of 4.208,40€).
Social security contributions under the flat-rate scheme
In certain cases, taxpayers who have opted for the flat-rate scheme may benefit from an important reduction in the social security contributions due.
Such facilitation only concerns those who exercise their activity in the form of a business and are enrolled in the INPS artisans’ and traders’ funds.
For such persons, there is a 35% reduction on the payment of INPS social security contributions.
This reduction is not compulsory. Requesting of refusing the contribution reduction is up to the entrepreneur.
Freelancers enrolled in the INPS separate management fund or in private pension funds always pay full contributions.